Recruiters and job seekers are seen at a June 7 job fair in Golden, Colorado. Photo by Rick Wilking/Reuters

The U.S. unemployment rate crawled up to 4.4 percent in June, something many economists pointed to as a positive sign that more people are rejoining the workforce. But what can you actually glean from the monthly unemployment number?

Frankly, not much. It comes from a modest sample of 60,000 American households, out of a total of more than 100 million households, so it is bound to swing significantly from month to month. In other words, the monthly number that makes the headlines is a statistical artifact, a fact reinforced by the monthly “revisions.” In the report released today, for instance, the Bureau of Labor Statistics notably and upwardly adjusted the number of jobs supposedly added to the American economy over the past two months.

The real question, however, is simply this: What can you tell over the course of, say, a year from any one month’s unemployment number? Here are my answers:

The unemployment rate is down noticeably, from 5.1 percent a year ago to 4.4 percent in June 2017, a drop of nearly one sixth. No question. And our own more inclusive U7, the immodestly entitled “Solman Scale,” which includes both the unemployed and underemployed, is down from 11.68 percent to 10.68 over the past year, a decline of nearly one tenth. Not bad at all.

So what’s not to like? As pointed out by tweeters left and right, the troubling number is the rise in wages — or, more accurately, the lack of a rise in wages that would be consistent with a low unemployment rate.

READ MORE: The hottest chart in economics, and what it means

Over the past year, wages have risen about 2.3 percent. Subtract inflation, which has run at nearly 2 percent over the past 12 months, and you have almost no wage growth at all.
Not to worry, says Nariman Behravesh, chief economist at IHS Markit:

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So, as we Brooklyn Dodger fans used to say in the 1950s after being walloped yet again by the New York Yankees: “Wait till next year.”

But, writes Republican economist Douglas Holtz-Eakin, whom we’ve long turned to for conservative analysis: “The only weak a point in the payroll survey was the growth in average hourly earnings … When combined with flat average weekly hours, the foundations of income growth were fairly soft.”

READ MORE: 5 ways higher interest rates could affect you

And economists who lean left were, albeit predictably, even more skeptical.

Betsey Stevenson, a former member of President Obama’s Council of Economic Advisors, tweeted: “Employment growth is strong, unemployment is low, [and] yet there are few signs that the hunt for workers is causing employers to push up wages.”

And her esteemed economist partner Justin Wolfers chimed in: “When you next hear an employer whining about labor shortages, remind them that they could try offering higher wages.”

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But if employers are not offering higher wages, there must be a reason. And the most obvious candidate is a mismatch between what job applicants bring to the table these days and what employers are willing — or are forced to — pay them.

Is a “reserved army of the unemployed” tamping down wages? Or are today’s unemployed or underemployed simply lacking the skills that employers think they need? There’s no way to tell. But the meta-story of U.S. income and wealth growth over that past 30 years or so is pretty clear: growing inequality. And if average wages aren’t budging, that trend is bound to continue. As today’s unemployment report suggests, they haven’t budged in a year.

The post What can you actually learn from the monthly unemployment number? appeared first on PBS NewsHour.

The “elephant chart” explains the rise of populism in the developed world and so much more. Economics correspondent Paul Solman discusses with economist Branko Milanovic.

Editor’s Note: The Elephant Chart. Rarely has one economic picture had as much impact as this one. Tonight’s Making Sen$e Thursday story on the PBS NewsHour profiles its creator, economist Branko Milanovic. It explains the rise of populism in the developed world and so much more.

When I met with Milanovic, we discussed his chart in greater detail than a NewsHour story could explore. So here’s a more in-depth look at the implications of his increasingly famous visualizing.

— Paul Solman, Economics Correspondent

BRANKO MILANOVIC: In June 2012, the first time I saw what would later become the elephant chart, I was immediately struck. I still remember that day, because I thought, well that’s exactly what we all knew had happened. I mean it really worked very intuitively, but we have not seen the numbers to confirm that.

PAUL SOLMAN: And what is it that we knew?

BRANKO MILANOVIC:  We knew that people in China and large numbers of groups in Asia who were not rich, compared to Americans, have done very well. We knew that lower and middle class Americans and Japanese and Germans have not done well. And that’s exactly what the chart shows. And we also knew that the top 1 percent in the rich countries have done well.

PAUL SOLMAN: But this is four years before Brexit, four years before Donald Trump.

BRANKO MILANOVIC: Yes, these processes were already going on from the late 1980s to mid-1990s. There was a discussion among the small group of people who worked on rising inequality in the U.S. We knew that China was growing much faster than the rich world. All the components were there. Actually putting them all together and seeing them as one picture was the novelty.

PAUL SOLMAN: I’ve seen the elephant chart used in a classroom in a way that was suggesting, perhaps subliminally: “Hey, inequality isn’t really so bad because look how many people are benefiting from economic growth around the world. Global inequality is actually decreasing.”

BRANKO MILANOVIC: You know, there is some truth to that. Let me point out two things. The first one is that if you actually look at this chart, you basically don’t see any group of people who have a decline in income. Everybody on that chart is above the point where we actually have zero growth. The second good thing: If you really were to be very cosmopolitan and look at the world as if it were one country, you would say, “Look, we have a situation that a large hunk of people — two and a half billion — have done extremely well. The level of global poverty has actually gone down. These people not only now have sewage and electricity, some have even become tourists. They have better jobs.” This is mainly resurgent Asia.

So then you say, “Well, what’s the big deal?”

The problem is that this is a very abstract view of the world, which doesn’t take any cognizance of the political reality. Because the political reality is there are all these people who have done poorly relative to the rest of the world. They feel poor people in Asia breathing down their necks because of outsourcing, because of imports and so on. And then they also see that the top 1 percent in their own countries have done very well.

They are feeling fear from both ends — from one end because the other people are catching up to them and from the other, as people from their own countries are moving further and further ahead.

PAUL SOLMAN: And that’s why the elephant graph has such oomph to it, right? Because you can see, relative to either side of the trough, that it’s the formerly middle class people of the developed world whose outcomes are so different from everybody else in this period.

BRANKO MILANOVIC: Yes, the middle class in the rich countries is where the political game is being played. They are voting in elections in the U.S., U.K., France and Germany. They are working people in the upper part of the global income distribution. They might on average be happy that the Chinese are doing well, but they are not happy that the Chinese are doing well relative to them.

PAUL SOLMAN: Do you explain the rise in populism in the post-industrialized world in terms of the graph?

BRANKO MILANOVIC: Broadly speaking, yes. But let me just make a caveat. People believe, sometimes argue, that the graph overemphasizes the role of globalization. Globalization is one factor but there is also technological change, though in my opinion that is not completely unrelated to globalization, because though there is technological change in iPhones, for example, they are being produced physically thanks to globalization in Burma or Vietnam. It would be different if they were being produced in the U.S. or Sweden.

The third factor is policy: the decline in tax rates, reduced taxation of capital and all of that.

All three elements played a role. But I really believe that, of the three, globalization is probably the most important one.

PAUL SOLMAN: But most economists would say it’s technological change and maybe policy as well. I think most economists would relegate globalization to the third spot on the list.

BRANKO MILANOVIC: Well, the studies that relate to China and Chinese penetration of the U.S. market show that U.S. labor is actually losing. Not only do people lose the jobs themselves, but over the longer term, they go for jobs that pay much less. I believe that people who emphasize technology do it somewhat naively. They believe technological change is some kind of manna from heaven, which happens unrelated to the underlying globalization. I think it’s wrong. It’s actually that you have technological change which pays off in the globalized world.

PAUL SOLMAN: Back around the turn of the millennium, Ralph Gomory and William Baumol did a study in which they said, “Hey, it’s entirely possible that trade and freer trade will hurt lots of Americans, because the rest of the world will start producing what we have been producing. The world may be better off; the American consumer may be better off. But lots of American workers will be worse off.” That argument was treated with great skepticism at the time.

BRANKO MILANOVIC: I don’t understand why people are sometimes surprised by globalization’s effects. This is not something new. We know that in the same process of globalization in the 1950s, 1960s and 1970s, Indian manufacturing, which was really textiles, was essentially wiped out by English competition. So it’s not like something that is now happening with deindustrialization of the West that has never happened to anybody before.

In every culture, you have really dramatic dislocation. We had it in the U.K. during the industrial revolution. We had it in India, which was conquered by British textiles and colonialism.

PAUL SOLMAN:  But don’t you think that for every population that experiences something like this, it comes out of left field? Because it isn’t something you’ve experienced before. You haven’t read economic history; you haven’t looked at the enclosure movement in England and said, “Oh, what the hell. This is old news.”

BRANKO MILANOVIC: I agree. The reaction of the people is totally understandable. I’m just saying that the economists who are somewhat surprised by the effects of globalization/technological progress have not paid enough attention to economic history. But for individual people, obviously, they are in shock. One thing was promised to them: Essentially with globalization, they would all get better off and then gradually they see that their wages are stagnant, and they’ve been stagnant for 20 years.

Watch Making Sen$e’s latest story on the hottest curve in economics right now.

PAUL SOLMAN:  Do you think that the economics establishment sold people a false bill of goods?

BRANKO MILANOVIC: Well I think there are two areas where the economics establishment didn’t pay much attention, and they recognize that now. One is economic history, and the other is equality. If you look at the last 25 years, economic history was relegated to the very lowest rank of anything that was done in economics.

PAUL SOLMAN:  A lot of academic economic history departments shut down.

BRANKO MILANOVIC:  They were shut down. And also, in terms of resources and respect, inequality and income distribution were left even further behind. Today, really important issues have come to the fore because of globalization and Brexit and Trump and all of that which have really been totally unstudied or understudied in economics.

I was at the World Bank and a commission reviewed our work on inequality for the U.S. Congress or somebody, and the head of the commission said to us: “You are spending taxpayer money to study issues like inequality? Which goes directly against capitalism and growth.” That was the perception, that it should not be studied.

In the U.S. when people like me started writing things about inequality, the economic journals had no classification for inequality. I couldn’t find where to submit my inequality papers because there was no such topic. There was welfare, there was health issues, there was trade obviously. Finance had hundreds of sub groups.

PAUL SOLMAN:  But now, one of Donald Trump’s top economic advisors, Peter Navarro, whom we’ve talked to, does talk about the effects of globalization on inequality.

So, in the end, what is your interpretation of the elephant chart?

BRANKO MILANOVIC: My interpretation is that it reflects a period of high globalization, which is rebalancing economic power between Asia and Europe and leading to the relative decline of the middle class of the Western countries.

PAUL SOLMAN: Is that a bad thing or a good thing?

BRANKO MILANOVIC: It’s a bad thing for those people who have actually declined. But it could be a good thing for the rest of the world because their incomes went up.

The post The hottest chart in economics, and what it means appeared first on PBS NewsHour.

“It stands before you like a beacon. This is Jersey City like you’ve never seen it before. This is Trump Bay Street.”

Well, the view is from Trump Bay Street (to correct the building’s website slightly, at the top of which this photo appears), not the building itself. But proximity to Manhattan is the trump card, if you will, for the residential tower: a model of luxury, and also a model of a loophole U.S. developers use in a controversial citizenship-for-cash program. They use the loophole to obtain foreign financing for projects like this one, developed by Donald Trump’s son-in-law, Jared Kushner. Let’s let the website continue:

“The amenity spaces feature furnishings by the luxury brand RH. From the pool to the chef’s table to the observation deck on the 52nd floor, all areas have been curated to elevate the residential experience.”

What the 52-story residential tower also features is the secret of how American real estate developers can (and do) get inexpensive financing for luxury projects in prime locations by selling U.S. visas to foreign investors at half price.

The red dot is the site of Trump Bay Street. The blue tower just across the water is the World Trade Center. Seventeen minutes by subway.

It was Kushner Companies, the real estate firm of Donald Trump’s son-in-law, Jared Kushner, that put up Trump Bay Street. (His father-in-law licensed his name to the development.) The tower obviously cost a bundle to build. What we explain on June 15’s PBS NewsHour in our weekly Thursday Making Sen$e story is the loophole in the EB-5 visa program used by the developer.

As we’ve reported several times over the past two years, any American firm can apply for EB-5 visas for foreign investors, from luxury projects in Manhattan and Brooklyn, as we reported in 2015, to a ski-resort-plus-biotech-center in the most remote reaches of northern Vermont, which we covered several times over the course of a year, as the magnitude of the fraud there — the largest in EB-5 history — became apparent.

But in all EB-5 projects, most of them legit, the investors get a green card assuring permanent U.S. residency (on the way to formal citizenship) for themselves and all family members under age 21 in exchange for a $1 million dollar investment, so long as the money creates 10 U.S. jobs. There’s an added sweetener for areas that badly need jobs. If the jobs are created in a rural area, or in a U.S. city “targeted employment area” with an unemployment rate 1.5 times the national unemployment average, then the visa price is cut in half: just $500,000 to create 10 jobs gets you a ticket to U.S. citizenship. (By the way, the investors are also promised a return on their investment by the managers of it, but that’s like any investment: maybe it pays off financially; maybe it doesn’t.)

Now take a look at this map of Jersey city, created by journalist Norman Oder for his article in City & State New York.

The red-outlined boxes are Jersey City’s neighborhoods — its “census tracts.” And that blue jigsaw puzzle piece covering 16 of them is what’s called the “targeted employment area” created by Kushner Companies to get the discounted foreign financing for Trump Bay Street, the red dot closest to the water.

Why such a tortuous new area? Because Trump Bay Street was built in a booming neighborhood. Its home census tract was clearly not a “targeted employment area.” In fact, when the developer applied for permission to solicit foreign EB-5 investors, the unemployment rate in this census tract was a mere 3.1 percent, more than 1.5 times below the national unemployment rate, not 1.5 times above it. So Kushner Companies drew up a “targeted employment area” of 15 additional neighborhoods — “census tracts” that extended south into the very poorest and most dangerous parts of Jersey City.

The tip of the blue puzzle piece at the lower left marks the end of the gerrymandered TEA: the “targeted employment area.” It’s past Ellis Island and even the Statue of Liberty, miles from Trump Bay Street, from which lower Manhattan is one subway stop away. But all the poor census tracts in between, along Grand Street and Garfield Avenue, had to be added in order to hike reach a high enough unemployment rate. And indeed, the area wound up with a TEA in which the average unemployment rate was fully 9.8 percent.

The question is: How many jobs has Trump Bay Street created in those job-starved neighborhoods? We try to provide something of an answer on tonight’s PBS NewsHour, as well as the story of the latest Kushner project in Jersey City.

The post How Jared Kushner and others gerrymander to sell visas to foreigners — at a steep discount appeared first on PBS NewsHour.

A jobseeker shakes hands with a recruiter for SCL Health System at the Colorado Hospital Association’s health care career event. While the economy only grew by a disappointing 138,000 jobs in May, there was further job expansion in one inexorably growing sector of the economy — health care. Photo by Rick Wilking/Reuters

A quick look at today’s headline unemployment number, and you’d think the U.S. job market was killing it with the official unemployment rate down again to 4.3 percent from 4.4 percent last month, and a stunning drop from fully 10 percent in October 2009, at the depth of the post-Crash recession. Moreover, 4.3 percent has often been referred to as “full employment,” or somewhere close to it, because there are always millions of Americans between jobs who are obliged to tell the monthly survey takers that they didn’t work a lick in the past seven days.

And yet… the economy only grew by a disappointing 138,000 jobs in May, though the “civilian non institutional population” added about 180,000 people. Moreover, the number of jobs added in the last two months — March and April — turned out to be much much lower than initially reported — a combined 66,000 fewer new jobs in all.

Now, I always tell people to not make too much of any one month’s number, and I try not to myself. The numbers come from surveys, taken from samples of American households and employers. But hey, I’m a “journalist” (from the French daily) and this is today’s news. And even if you take a longer view, it’s now three months in a row that suggest slower growth, a far cry from last year’s hearty average of 180,000 net new jobs a month. By contrast, over the past three months, the U.S. economy added just 121,000 jobs per month on average. And a whopping 608,000 people seem to have left the workforce entirely in May alone.

Okay, many of them are probably retirees. That number we’ve been using for the past few years — 10,000 Americans a day hitting age 65 — still holds, for a grand total of something like 300,000 potential retirees a month. But that’s not 600,000!

So are folks just giving up? Are “seniors” who had kept looking for jobs after age 65 finally saying “to hell with it”? Or is the May number in need of downward revision, just like the jobs overstatements of the past two months? I wouldn’t want to bet on the right answer. And neither should you.

There was further job expansion in one inexorably growing sector of the economy — health care — which added another 24,000 jobs in May. As we recently reported on Making Sen$e, the expected growth rate for the sector from 2014 to 2024 is a very healthy 19 percent. (The expected growth rate for all other industries over the same time period: barely 7 percent.)

And it’s no surprise. Our country is visibly aging, with people 65 and older now making up about 15 percent of our population. As people get older, not only do they leave the labor force, but their health needs increase, raising the demand for health care workers.

So why, you might ask, are so many people leaving the labor force when the demand for work that almost anyone can arguably learn to do is growing?

READ MORE: The demand for nursing isn’t going away. Will more men join their ranks?

Well, a lot of health care work is quite demanding, both emotionally and physically. Can older workers really do it well, or do it at all?

Another problem with health care work: the pay. Yes, doctors and even some nurses are generously compensated (not to mention drug reps, hospital and insurance executives). But so many health care jobs are low-end, low-pay. And when you look at last month’s overall pay numbers, you can quickly see that “production and nonsupervisory employees” in general got an average raise of 3 cents in May, which projects to a measly annual increase of 1.6 percent, less than the rate of inflation (2.2 percent over the past year).

As it happens, we’ve just begun a Making Sen$e broadcast story about another key industry — retail, where nearly 5 million American workers were employed as of 2014, but that has hemorrhaged jobs recently. As the New York Times reported in April, “about 89,000 American workers “in general merchandise stores have been laid off since October…That is more than all the people employed in the coal industry.”

And sure enough, in May, the trend continued. As economist Heidi Shierholz tweeted this morning: “Retail continues slide: has lost 6,000 jobs per month on avg for the last 8 months (compared to 22,000 added per month over the prior 4 yrs)”

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What were other commentators saying?

An economist we have often relied on, Justin Wolfers:

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Liberal economist Elise Gould:

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Conservative economists were no kinder. Republican Douglas Holtz-Eakin, whom we also relied on often over the years, posted this: “On the heels of a strong April jobs report and a month of strong readings of the high-frequency data, the labor market appeared set to take off.  No.”

And finally, Manhattan Institute economist Diana Furchtgott-Roth had this to say:

It is fitting that President Trump withdrew from the Paris Accord the day before the Labor Department issued its employment report for May, thereby saving the economy from future higher energy prices and additional regulation. With only 138,000 jobs created, and a decline in the labor force participation rate, the economy needs to do better.

One last item. As we try to do every month, we calculate what we call “U7,” the most inclusive reckoning of under- and unemployment around, believing that the “headline” unemployment number that comes out every month, “U3,” considerably understates the real state of the labor market. President Trump agrees, saying in Iowa this past December: “The unemployment number, as you know, is totally fiction. If you look for a job for six months and then you give up, they consider you give up. You just give up. You go home. You say, ‘Darling, I can’t get a job.’ They consider you statistically employed. It’s not the way. But don’t worry about it because it’s going to take care of itself pretty quickly.” Trump estimated the actual unemployment rate at 42 percent.

Well, we can’t really imagine a number more inclusive than U7, and the fact is, it  dropped to 10.63 percent in May, the lowest number since we began reporting U7 7 years ago. So 42 percent seems, well, typically off-the-cuff.

READ MORE: Why aren’t ‘manly’ men taking ‘girly’ jobs?

Trump is right to be concerned, of course; a 10.63 percent U7 still means roughly 17.5 million under- or unemployed Americans. But at the rate of job growth since President Trump took office, the problem is unlikely to take care of itself anytime soon.

As for the Administration’s take, Sean Spicer dutifully did what all press secretarIes are expected to do: cast the monthly job report in the most positive light. And so he said it showed that: “Americans seeking jobs are having more success finding them than at any point in the last 16 years,” a statement that could be true, but came with no visible means of support. His full statement is here.

The post Analysis: Today’s unemployment number fools us and President Trump, but for different reasons appeared first on PBS NewsHour.

Morning commuters cross the street as the sun shines down 42nd St in New York City on March 16, 2016. Photo by Lucas Jackson/Reuters

Richard Florida may be the most widely read author on the subject of cities these days, and probably has been since the turn of the millennium. He first became known for cheerleading the idea that if cities attracted what he called “the creative class” — professionals in the arts, in the media, in tech — they would prosper. And so they did — with a vengeance.

But in a new book, he explains the real-world vengeance that creative class migration has wrought. “The new urban crisis,” he now calls it: the ever more yawning gap between those prospering in cities and those who serve them.

For this Thursday’s Making Sen$e broadcast story, Florida and I toured New York’s tourist sensation, the High Line, and I asked him some tough questions, which for better or worse didn’t make the final cut for our segment.

PAUL SOLMAN: As you began to realize the double-edged nature of innovative clustering, did you begin to regret having pushed it as vigorously as you did?

RICHARD FLORIDA: No, because I think we have to continue to push it. We have to continue to make our cities more innovative and knowledge-based.

I am worried about the backlash. On the one hand, from the right, you have this populist backlash, which is quite anti-urban — de-funding cities, cutting budgets, closing the door on immigrants. On the left, you have this kind of NIMBY, not-in-my-backyard, reaction, which is “no, no, no, we don’t want this here.”

And what scares me in this NIMBY behavior is not just that it limits housing development and pushes up prices. It actually holds back innovation by limiting clustering. For this reason, I prefer to call it the New Urban Luddism. It’s equivalent to the Luddites, who in the old factories in England smashed the machines, because they were scared their jobs would be eliminated.

We have these ballot measures now in places like San Francisco that say “we don’t want any more tech companies. We don’t want any more tech workers.” Well, that’s throwing the proverbial baby out with the bathwater.

READ MORE: How the housing markets in 5 U.S. cities may have cost you $5,000 in lost wages

If we do that, we’re not going to get the innovation and the new companies that drive our country forward. So we need tech companies, but at the same time we need to build housing and create opportunity for more people to participate.

PAUL SOLMAN: And it’s also daunting that the people who are in what were formerly middle-class neighborhoods or areas, if they’re really talented or lucky or both, come to places like San Francisco or New York as fast as they can, getting the heck out of where they were, thereby depriving those places of their skills and talents.

RICHARD FLORIDA: We’re not just economically unequal, our country is geographically unequal as well. And it is getting worse. It used to be that if you were a young person, you could get out. As a young person growing up in New Jersey, I got a scholarship. I went to Rutgers College. I went to Columbia University for graduate school. I could afford to live in New York.

The Bank of Mom and Dad

Now, though, what’s really becoming quite worrisome is that increasingly, to buy access to these locations, you can’t do it alone. Maybe you could do it as a young kid with five or six roommates. But as soon as you get a little older, you really need the Bank of Mom and Dad.

If you don’t have the Bank of Mom and Dad, it is very hard to secure one of these premier locations. It’s essentially reinforcing the class advantage that comes from growing up with affluent parents. How do you secure a location for yourself and then hopefully a family if you don’t have those advantages?

I think we’re not quite there yet, but we’re beginning to see a society in which access to premier locations really depends not only on your own talent, but on your inheritance.

PAUL SOLMAN: But you’re from a family where the father was a factory worker in Newark, New Jersey. Given the same level of talent, would you have made it to where you are today?

RICHARD FLORIDA: I don’t think I would have made it.

PAUL SOLMAN: Really?

RICHARD FLORIDA: I don’t think I would have made it. First, I don’t think I would have gotten into Rutgers College. I didn’t have great SATs, but at that time a good SAT, not a great SAT, could get you in. But going away to college, that was a life-changing experience for me.

Richard Florida or Tony Soprano?

I grew up an Italian-American tough guy kind of “Sopranos” neighborhood, to be quite frank. I went to Catholic school, but you had to hide the fact that you were smart.

But going to Rutgers at 17 lifted me out of that environment and put me in an environment where I could explore my interests. My geography professor gave us an assignment: “Take the train to New York. Go look at the Flatiron Building. Go look at Lower Manhattan. Go look at the Meatpacking district.” That’s piqued my interest in cities, it hooked me. I continued in college and went to graduate school for urban planning and made it my passion and my career. I don’t think I would have gotten into as good of a college today, and certainly I don’t think I would have been able to become a professor in today’s environment; it’s much harder for someone with my background today.

I certainly don’t find a lot of other people like me with my kind of background now. I find kids who grew up in much more middle-class or advantaged households. So I think it’s very, very hard, and especially in areas where education matters, it’s harder.

READ MORE: The housing shortage and homelessness in San Francisco. Is there a solution?

PAUL SOLMAN: It reminds me of the theme of inevitability. What’s happening is not only clustering in cities, but the spin-off effect that young people meet in those clusters and the smart people hook up with the smart people and they have smart kids to whom they are giving every advantage. And the process becomes self-perpetuating.

Can anyone stop the inequality merry-go-round?

RICHARD FLORIDA: I wrote about this back in 2002 in “Rise of the Creative Class,” this effect that is actually making our society more divided. Back then I wrote about it because talented and creative people are meeting and marrying one another and perpetuating advantage. The most stable marriages, the most long-running marriages, are marriages among highly educated and more affluent people. So marriage is in effect becoming the province of affluent people. Here is another way the advantages of class and location combined with coupling perpetuate themselves.

There’s great research now which shows the advantage of being a family in one of these high performing superstar metros and neighborhoods. It’s not only your income and that of your parents, but being in that location and having access to great museums, good schools — charter schools, public schools and private schools — all of the services and amenities that come with that. All of the advantages of meeting people, getting exposed to different networks — they compound this advantage above and beyond class and income.

PAUL SOLMAN: But if the cities, by attracting great talent from the countryside in the United States and mainly from abroad, are creating all these inequalities within them and between them and the rest of the country, then Donald Trump’s solution would seem to be a good one; that is, let’s even the playing field here. Cities shouldn’t get all the advantages; the rest of the country should.

RICHARD FLORIDA: That’s the problem. You can’t even the playing field. In fact, America’s playing field is one of the most even in the world. The United States has one of the most geographically distributed systems of cities on the planet. The five largest metros in the United States produce roughly 25 percent of our GDP.

The five largest metros in Canada produce 50 percent of its GDP. And one metro, Seoul, produces more than 50 percent of South Korea’s GDP. The concentration in clustering of advantage in cities is happening not simply because people are “choosing” it, but because it’s where economic growth comes from.

The world isn’t flat, it’s spiky

I wrote a long time ago: The world isn’t flat; the world is spiky and it’s getting spikier and spikier. So we have to both invest in the spikes and keep them strong, but make sure other places are connected and participate in those advantages. If we flatten the spikes, we’re going to undermine our own economy.

PAUL SOLMAN: But we’ll be more egalitarian. We’ll not have the jaggedness of a polarized or economically polarized America to the extent we do now, and to the extent it’s [becoming] more and more [polarized].

RICHARD FLORIDA: We’ll be a less innovative, less productive economy, and we’ll have fewer jobs, have fewer good jobs. You know, we’re in the greatest city in the world right now [New York], this great hub of innovation and finance and talent. But I live in Toronto. The Torontos and Vancouvers and Amsterdams and Sydneys and Melbournes —  they’re in a different place than they were 20 years ago. They have fantastic universities, they’re attracting people, they’re grown-up, wonderful cities now with all the amenities. So if this goes on for eight years or so, it could be that some of that talent reorients itself and moves to great cities outside the United States. That would have a significant negative effect on the innovativeness of the U.S. economy, and its ability to produce new high-tech startups. Maybe the next Apples or Googles will really happen somewhere else.

Is the brain drain over?

PAUL SOLMAN: For years, I’ve taught students from abroad who longed to stay in the U.S. They are now talking about Australia, Europe and Asia and do not talk the way they did just a year or two ago about coming to and staying in the United States.

RICHARD FLORIDA: You are absolutely right: they don’t. I see it in my students in Toronto at the business school, the Rotman School at the University of Toronto, where I teach. They come from all over the world, including the U.S., and 90-plus percent of them want to stay in Toronto. According to the statistics, a third to a half of high-tech, high-growth startups have an immigrant on the founding team.

Boy, oh boy. If that gets redirected, the United States loses that innovation impulse, loses that entrepreneurial impulse, will it be Melbourne, will it be Sydney, will it be Toronto, will it be Vancouver, will it be a place that we don’t even think about today that’s growing? You start to see these knowledge clusters emerge outside the United States, and that’s worrying from a national point of view. Advantages that we have taken for granted could be cut off.

READ MORE: A quarter of all renters spend half of income on housing

PAUL SOLMAN: But it’s such a double-edged sword, isn’t it? On the one hand, we need these clusters that you’ve been promoting for 15, 20 years. On the other hand, these clusters cause the crisis that your whole book is about.

RICHARD FLORIDA: This is the central contradiction of capitalism. It’s not just “New Urban Crisis,” but the central crisis of capitalism today. The very force that propels our economy divides us and pulls us apart and this is the national conversation we need to have. By the way, I don’t have all the answers. This is a conversation that we need to have as a country.

PAUL SOLMAN: I’ve watched this process my entire, my entire career as a business and economics reporter. It’s been 40 years. And all I’ve seen is more and more economic inequality, more and more of the clusters you’re seeing. You start the book talking about New York in the 1970s when this place was bereft, where people would want to get out of here, and then in the ‘80s with the crack epidemic. And now, you’ve got the same apartments that sold for $50,000 back in the’ 70s are $5 million apartments today, right?

RICHARD FLORIDA: Somebody asked me recently: “If you could predict the future, the next 10 years, what would you see?” It was a very good question and I said: You know what? Let me go back the last 10 or 15 years. Everybody was talking about George W Bush and the war in the Middle East and Iraq and terrorism.

The big story for me was the urban revival. Our cities came back; they were remade. Tech came back. People came in.

The hope: Think locally and act locally

Looking out to the next 10 years, I think it’s got to be local initiative. The federal government didn’t make the boom happen; it was local initiative and local people and local business and local mayors doing it.

Here are a couple of reasons why I’m cautiously optimistic. One is because I spend time in cities all over the country and all over the world — not just in New York and San Francisco. I go to the places that are second- and third-tier places trying to rebuild. I lived in Pittsburgh for 17 years, and what you see there is local initiative to rebuild those economies.

Does it work all the time? No, but those economies are stronger than they were. So I really do think that mayors and local city builders and local people and their neighborhoods are building and can rebuild even in tough times when the deck is stacked against them like today

The other reason I’m optimistic is I don’t see the kind of extreme political polarization we have at the national level in Washington, D.C., at the local level. When I visit communities all across the country, I cannot tell if the mayor or local elected officials are Democrat or Republican. There’s no Democratic and Republican way to run a city. You just build a better city for people. That’s why I’m optimistic — because when it comes to building a local economy, people have done it and can do it. If we give them the tools, the narrative, the conversation about inclusion — they can make it happen.

The post Is the ‘creative class’ saving our cities, or making them impossible to live in? appeared first on PBS NewsHour.

How does anger affect the way we think? And does it skew our judgment of risk? Photo by PeopleImages via Getty Images

Before you read the following post on the differing effects of anger and fear, based on an interview with psychologist Jennifer Lerner, you might want to take the exercise she gave to subjects right after 9/11. Here it is for you to fill out (but only if you’re up to it.) Half the subjects saw:

OPTION 1

Photo courtesy Jennifer Lerner

You are about to see a photo and hear about an event related to the terrorist attacks on our country. Please try to experience the event as vividly as possible. You may even want to take a minute to let yourself fully feel any emotions it evokes.

(newscaster voiceover)Thousands of Palestinians paraded through cities in the West Bank and Gaza, celebrating the attacks on the United States. A film that Associated Press did not air, fearing reprisals to its camera crew, reportedly shows “Palestinian policemen celebrating and shooting into the air, in addition to civilians dancing.”

A Reuters report filed in Beirut stated that on September 11th “Jubilant Palestinians took to the streets of refugee camps of Lebanon and the West Bank, waving Palestinian flags, chanting ‘God is great,’ and distributing sweets to celebrate the attacks on major U.S. landmarks and government offices.”

The protests are not limited to Palestine and Afghanistan. In Indonesia, 8,000 protestors carrying banners calling Americans terrorists marched past the U.S. Embassy, through Jakarta’s business district. Since the September 11 terrorist attacks, Indonesia’s Vice President Hamzah Haz has often delivered harsh words against the United States. He has said that he hoped the attacks would cleanse America of its sins.

While Americans are shocked and wounded, others continue to rejoice in our suffering. Bin Laden and the protestors feel they have knocked down the “most powerful nation in the world.”

The terrorist attacks evoked a lot of emotion in Americans. We are particularly interested in what makes you most ANGRY about the attacks.

Please describe in detail the one thing that makes you most angry about the attacks. Write as detailed a description of that thing as possible. If you can, write your description so that someone reading it might even get angry from learning about the situation.

What aspect of the terrorist attacks makes you the most angry?

Why does it make you so angry?

The other half of the sample were given option No. 2 and shown the second picture.

OPTION 2

Photo courtesy Jennifer Lerner

You are about to see a photo and hear about an event related to the terrorist attacks on our country. Please try to experience the event as vividly as possible. You may even want to take a minute to let yourself fully feel any emotions it evokes.

(newscaster voiceover) Today is another unsettling day as Americans grapple with a menacing and invisible enemy. The postmaster general acknowledges that he cannot guarantee the safety of the mail. President Bush warns that the nation is “still under attack.” We’re told that our mail might be filled with an ominous powder, someone might slip across a border with a jar of viruses, building ventilation systems are impossible to guard and nuclear reactors may be vulnerable. At first only government and media workers were affected by anthrax. But new cases of exposure are appearing everyday in more and more states across the nation, and around the world.

Since being jolted by September 11th and the persistent, mysterious spread of anthrax, the government has been struggling to determine which weapon might next be aimed at our nation. Threats of smallpox loom especially large, because it can spread to other people before symptoms are noticed. Since vaccination for smallpox has been abandoned, most people today are vulnerable to the disease. Ancient and vicious, the virus has killed more people over the ages than any other infectious disease.

The FBI has warned Americans of another ensuing attack but no one knows what to expect. All that is known is that Bin Laden and Al-Qaeda have the capability and the will to bring about greater destruction throughout America than on September 11th.

The terrorist attacks evoked a lot of emotion in Americans. We are particularly interested in what makes you most AFRAID OR ANXIOUS about the attacks.

Please describe in detail the one thing that makes you most afraid or anxious about the attacks. Write as detailed a description of that thing as possible. If you can, write your description so that someone reading it might even get anxious from learning about the situation.

What aspect of the terrorist attacks makes you the most anxious? Why does it make you so anxious?

This week’s Making Sen$e broadcast segment is about the biology of leadership, as explored by economist Andy Kim. But it also includes fascinating research by psychologist Jennifer Lerner, who ran the above study and now teaches top executives in Harvard’s public policy graduate school, the John F. Kennedy School of Government. Here’s her interpretation of the research results.

Watch this week’s Making Sen$e report about the biology of leadership.

Jennifer Lerner: In a nationwide field experiment after Sept. 11, we took news clips from CNN and the New York Times that we had pre-tested. Some triggered fear, others triggered anger. Then we randomly assigned a nationwide sample that matched U.S. census figures on all major demographic variables. That way we knew we could generalize to the U.S. population as a whole. And what we found is that if you expose one group randomly to these anger-inducing news stories — these are things like images of people celebrating Osama Bin Laden — then people get mad, as expected.

But more importantly, when we then have them make a series of risk estimates, they perceive less risk in the world than do the people who are primed with fear. And that’s true not only for risks related to terrorism, but for triggers like the question, “What are the odds that you’ll get the flu this year?” People in an angry state think they’re less likely to get the flu than people in a fearful state.

So the important discovery is that rather than the conventional wisdom — negative mood leads to negative outlook — the emotion of anger leads to a relatively optimistic outlook when it comes to risk. It’s not that the angry person thinks, “good things are going to happen,” but instead, something like, “No matter what happens, I will prevail.”

Paul Solman: Because the angry person thinks in terms of agency — somebody has done something — and therefore it’s not as scary as something happening to me?

Jennifer Lerner: That’s right. Think about the angry people you know. They’re never, in the heat of anger, saying: “Hmmm. Let me think about this. I wonder…” No, the angry person says: “I know. I know he did it.” It’s very different from fear.

When we’re mad, this sense of certainty not only leads us to underperceive risk, but it also simplifies our thoughts. So not only are you taking more risks when you’re mad, but you’re also not thinking about them. So it can be dangerous in a lot of the decisions that we make.

There are only certain circumstances where being in the really angry state and thinking in a shallow way is beneficial. When I, for example, think about the [presidential] election campaign that we all went through, I see a beneficial role for anger — and there was a lot of anger — because there was a galvanizing effect of that anger.

Paul Solman: The benefit being…

Jennifer Lerner: Higher participation rates. So people turned out [in the primaries] and so that can be very beneficial. Look at the civil rights movement in our country. That started with anger, because people had to underestimate the risk in order to even try to achieve radical change.

Paul Solman: Against the odds that appeared to be against them at the time.

Jennifer Lerner: The odds were with the status quo. And so in the presidential primaries, I think there was a net benefit: turnout engagement at record levels.

Then we moved into the general election. The general election was a time when we really needed to think systematically, and I think there anger had more of an undermining role, because there was less consideration of questions like, “Is this a credible news source or not?” Those would have been beneficial.

Paul Solman: Does testosterone make a person more likely to be angry?

Jennifer Lerner: We know that anger makes you more likely to make snap judgments, and we know that men are more likely to experience anger and to take more risks as a result of that anger, in response to situations like the Sept. 11 attacks, for example. But we don’t yet have systematic data mapping all the relationships between testosterone and anger.

Part of the problem is that anger is very heterogeneous and so there are some affronts that are highly testosterone- and anger-related. So if someone doesn’t treat you well and disrespects you, that’s going to be an affront to your dominance and will be highly anger-related, whereas if you’re mad over some sort of social injustice, it doesn’t invoke the status domain as much.

Dacher Keltner has a book just out called “The Power Paradox.” Being at the top and also having a social dominance orientation causes us to lose touch with people and leads to sloppy thinking, shallow thinking. And that’s why you see some of these examples of people [in high places] making terrible mistakes. Rather than accruing wisdom as they ascend higher in the leadership ranks, perhaps fueled in part by testosterone, they actually accrue more distance between themselves and others.

The post Anger or fear: which is worse? appeared first on PBS NewsHour.

Economics correspondent Paul Solman sat down with Stevenson to discuss the growth in female-dominated sectors and how stigma might be holding men back from taking jobs seen as “women’s work.” Photo by Rayman via Getty Images

Editor’s Note: Over the past 20 years, female-dominated industries like health care and education services have grown immensely, while male-dominated industries like manufacturing have lost millions of jobs. The economy is shifting, and it seems like men are on the losing side. But it doesn’t have to be that way, says economist Betsey Stevenson, an associate professor of public policy and economics at the University of Michigan. In a column for Bloomberg, she’s blunt: Manly men need to do more girly jobs.

Economics correspondent Paul Solman sat down with Stevenson to discuss the growth in female-dominated sectors and how stigma might be holding men back from taking jobs seen as “women’s work.” Tune in to tonight’s Making Sen$e report on one man who breaks down the stereotype as an elementary school teacher and football coach, and watch last week’s report on how stigma holds more men back from becoming teachers.

— Kristen Doerer, Making Sen$e Editor

PAUL SOLMAN: So are there more jobs for unemployed or underemployed men, or men out of the labor force entirely, than we think?

BETSEY STEVENSON: Well, the economy is adding jobs. The labor market’s quite strong. The question is where are those jobs being added, and what we’re seeing is, jobs are being added in the service sector. That’s the direction the economy’s moving. We’ve seen particularly strong growth in education and health services, for instance. So if you look over the last 20 years, we’ve lost 5 million jobs in manufacturing and gained 9 million jobs in education and health services. So we’re more than making up for the jobs we’re losing, but the characteristics of those jobs, the identity associated with a worker who holds one of those jobs and the pay associated with those jobs, are different. It’s not about whether there are jobs, but about what kind of jobs there are.

PAUL SOLMAN: And the jobs you’re talking about are, at least historically, more associated with women than men.

BETSEY STEVENSON: Yes, so the service sector has always been where women are more likely to be drawn to. I highlight education and health services because that’s a job that has been majority women. Seventy-five percent of the people in those occupations are women currently. And you compare that to manufacturing jobs where you see the flip side where it’s mostly men. So you see shrinkage in male-dominated occupations, and where we see the growth in is female-dominated occupations.

PAUL SOLMAN: At least recently. It’s not like some of these professions were always female.

BETSEY STEVENSON: You know, I think that’s a really good point that what makes an occupation female dominated or male dominated is really cultural, and it can easily change. And you know when we think about things like home health care aids, people tend to think of that as a very female job, but in truth that’s a job that’s about physically lifting, moving, restraining people. And those jobs require great physical strength. You could imagine a different culture where we said, “Oh, those are jobs for men, because men need to be the ones to carry people to the bath and are able to lift and move people with great ease.”

Similarly, I was just talking with someone who was talking about trying to restrain a psychiatric patient and how difficult that is as a small woman. So you can imagine there are lots of jobs in education and health services where physical strength is an attribute, yet that’s been sort of sidelined, and we tend to emphasize the caring, the nurturing aspects, which makes people see them as feminine jobs.

Watch Paul Solman’s first report on how stigma may be holding men back from pursuing jobs in education.

PAUL SOLMAN: Why did that happen, do you suppose?

BETSEY STEVENSON: I’ve seen lots of economists say for decades now, “There are plenty of jobs. Men just need to get over themselves and go into these other fields.” I think what I’m trying to appreciate is that identity is tougher than that, and we need to think about how we transition men into these types of jobs in the new economy while preserving their notions of masculinity or shifting their notions of masculinity so that their identity moves seamlessly with them into these new jobs. And just sort of telling them, “Hey, you need to go into pink collar jobs,” is not working, and it’s frustrated a lot of men.

But I think that we need to be working together as a society to figure out how we make this shift, because the story of economic development is one in which machines and technological development change the need in the type of human labor that is used. And this shift has been going on for hundreds of years, and we’ve had to adapt. And I don’t think that what’s happening right now is really any different than what’s happened in the past, but what is different is we have larger participation of women than we’ve ever had before, and we have women who are responding more to the changing needs.

So college-educated workers have never done better than they’re doing in our current economy, and women are going to college more than men. They understand that that’s where the gains are, and they’re going. They see that these fields like education and health services are in demand and growing.

People point out that they are lower paid than some of the manufacturing jobs, but they actually have greater wage trajectories and there’s room for promotion and wage growth, because these are growing fields.

PAUL SOLMAN: What are the data on that? What are the data on how much you can make in a manufacturing job in America and how much you can make in health services, say?

BETSEY STEVENSON: What we’re seeing right now in manufacturing is very stagnant wages. So even if you can get one of these illustrious jobs, there’s not a lot of growth. So I think that it’s worth thinking not just about what’s the average wage, but what people’s paths can look like and also what their job stability looks like. Because losing your job is a path to lower wages for sure, and what we see in manufacturing is a lot more job loss. So you want to think about if I go into a profession, how likely will I be to stay there, to keep it? What will the path look like? Is there room for promotion? Is there room for growth? Is there room for me to get additional training?

Those are the kinds of questions that people need to be asking. And even if we bring back more manufacturing jobs, it’s not clear that those manufacturing jobs are going to come with paths to promotion and growth.

PAUL SOLMAN: I know you’re not a sociologist or a psychologist but you’ve studied this issue and written about it. Where is the resistance within men to pink collar jobs?

BETSEY STEVENSON: I think that part of it is they see the low starting pay and that feels somewhat insulting. I think they feel stigmatized, like they’re going in to do girls’ work. When I wrote that op-ed where I said manly men need to do girly jobs, I was trying to say: It’s ridiculous that we have these girly jobs and we talk about manly men. These are jobs. They’re good jobs. But at the same time we need to recognize that there are a lot of guys who feel, either because their friends or their community or because of themselves, that when they take one of these jobs that they are doing something girly, and that feeling is a barrier for them.

The post Why aren’t ‘manly’ men taking ‘girly’ jobs? appeared first on PBS NewsHour.

Courtesy Institute for Health Metrics and Evaluation at the University of Washington

The fruits of so-called “free enterprise” have long been debated in economics. The goal has been “wealth” or “human welfare” at least since Adam Smith published “An Inquiry into the Nature and Causes of the Wealth of Nations” in 1776. But what exactly is human welfare? And how do we measure wealth?

The obvious way: money. Simply measure how much money a society or individual earns or possesses, because money is so damn simple to count. But various economists have rejected simple as simplistic. Do we not care about values other than money? Education, say? Freedom? Health?

Nobel laureate economist Amartya Sen, for example, has long proposed we instead use a “human development index” that includes variables beyond monetary wealth.

And in using money as your key metric, you miss the side effects of becoming a latter day Uncle Scrooge, swimming in coin.

Consider the potentially corrosive effects of money on a fellow like Scrooge — there’s experimental evidence that “rich people are more likely to break the law while driving, help themselves to candy meant for children, cheat in a game of chance” or lie, as demonstrated in a Making Sen$e story we did a few years ago. Or more broadly and starkly, imagine that a town becomes “rich” by building a chemical plant, but pollution from the plant poisons its citizens for decades to come.

There is, however, one measure that seems relatively unobjectionable: life expectancy at birth. Leaving aside the thorny issue of life extension for its own sake, what is more desirable than more life?

Which brings us to the extraordinary new interactive map from the University of Washington’s Institute for Health Metrics and Evaluation — a county by county report on life expectancy in the United States as it has developed from 1980 to 2014.

The most dramatic finding is that U.S. counties vary in life expectancy by as much as 20 years. At the bottom: Oglala Lakota County, in South Dakota. The area, which includes the Pine Ridge Native American reservation, has a 2014 life expectancy of 66.8 years — lower than the average of 67.2 in Sudan.

At the top, a group of ski valley counties in central Colorado like Summit, where the life expectancy is 86.8 years — two years higher than any country on earth. (Aspen residents need not feel jealous; their Pitkin County has an average life expectancy of 86.5 years.)

We asked the chief researcher behind the project, Ali Mokdad, what most surprised him.

First, he said: “the disparity is increasing between the lowest and the highest.” And second: “in many places in this country, life expectancy is stagnant, only slightly improving, and it’s not keeping up with other Western countries we’re competitive with.”

As to why Oglala Lakota County in South Dakota is at the very bottom of the life expectancy, Mokdad has a predictable answer.

“Socioeconomic factors: education and income. An educated woman is more likely to seek health care or have access to health care and insurance,”

In the U.S., life expectancies can very by as much as 20 years depending on county. Photo by Sally Anscombe/via Getty Images

For the Colorado counties where life expectancy is higher than any country in the world, “it’s the reverse. They tend to be affluent, have health insurance, access to good health centers. If you click on the obesity visualization, you’ll see that obesity is very low.”

So what, in the end, are the key factors influencing life expectancy?

The opioid pandemic is certainly one of them, Mokdad says, but 74 percent of the difference between counties hinges on four lifestyle choices that are, in his words, “preventable”: blood pressure, obesity, smoking and physical inactivity.

Where does your county rank? Take a look at the interactive map to find out.

The post How does where you live affect your life expectancy? appeared first on PBS NewsHour.

Anita Dwyer (L) and Bea Severson hold signs as they participate in a rally and march in protest of higher taxes in Santa Barbara, California in this file photo taken April 4, 2009. Photo by Phil McCarten/Reuters

Journalist T.R. Reid has made a career out of traveling the world, looking for best practices in other lands. His latest journey — some might call it a junket — was to find the world’s best income tax systems and report them back to the home of tax revolution — the No-Taxation-Without-Representation United States of America.

With Tax Day around the corner, there’s no better time to visit Reid’s new book, “A Fine Mess: A Global Quest for a Simpler, Fairer, and More Efficient Tax System.”

PBS NewsHour’s Paul Solman talked to Reid about American income taxes and what we might learn from the rest of the world. For more, tune in to tonight’s Making Sen$e report, which airs every Thursday on the PBS NewsHour.

PAUL SOLMAN: Why an income tax to begin with in the United States?

T.R. REID: It used to be that we taxed property — zapped farmers basically. And there were very rich people who didn’t pay that much tax. So in 1913, they put in the income tax. It was incredibly popular. The tax we love to hate today.

SOLMAN: Why was it popular?

REID: Because it only taxed the Rockefellers, the Morgans and the Vanderbilts. It was aimed at the top 4 percent, and the top rate then was 7 percent. Woodrow Wilson had a big ceremony and said, “I’m delighted to be president at the creation of this popular new tax.”

SOLMAN: We also got a lot of our federal income from tariffs, right, from customs duties?

READ MORE: Column: The tax rules that let real estate moguls like Trump pay no federal income tax

REID: That’s how all countries start. You tax at the border. Because if you sail a ship in from India full of tea, it’s kind of hard to hide it. So it was an easy thing to tax for a young country. And then gradually we moved to property taxes, manufacturing taxes, and the income tax was the answer to a populist demand: Let’s go after the rich guys.

SOLMAN: The obvious question: What happened? It’s not that anymore.

REID: Well, we got into World War I, and they raised the rates and started taxing [the rich]. Then we got into World War II, and that’s when they taxed everybody, because they just needed more revenue.

SOLMAN: At a high marginal rate, right? For all income above a certain fairly high level.

REID: The taxes used to be very high in the 1950s. The top tax rate in America was 90 percent. And gradually, that came down. Today, the top rate is 39.6 percent.

SOLMAN: On the richest people.

REID: You’ve got to be in the top 1 percent to pay that. Very few people ever pay the 39.6.

SOLMAN: But it used to be 90.

REID: It was 90 in the ’50s. One of the people who paid it was a movie star called Ronald Reagan, and it made him hate taxes for the rest of his life.

SOLMAN: But if we go back to the high marginal rates of the past — that is, if you make enough income, the next amount of income is taxed at its highest rate, 39.6 now, used to be 90 percent — if we do that, wouldn’t people just leave like the French actor Gérard Depardieu, who left France for Russia?

REID: He absolutely did. France, they’re the world champion at soaking the rich on taxes. And at one point, they had what they called a hyper tax, 75 percent, and Gérard Depardieu and many others left the country. So I think there are diminishing returns here. The higher the rate, the more interest there is in avoiding the tax. Either you move or you shift your profits overseas, as American corporations have proven very good at doing.

SOLMAN: How much does the income tax cost us as Americans?

REID: We have the most expensive compliance system in the world. The IRS brags that they spend 35 cents for every $100 they collect. They’re very efficient collectors. And the reason is they stick the real cost on you and me. Americans spend about 6 billion hours a year collecting the data and filling out the forms. We spend $10 billion to H&R Block and other preparers. And on top of that, $2 billion in tax preparation software, which still takes hours of work. It’s outrageous the burden we put on people, and guess what, you go to Europe, you go to Japan, it’s 15 minutes and costs nothing.

SOLMAN: So what are the most egregious absurdities of the tax system in your view?

REID: How do you rate “most”? There’s a $7,500 credit if you buy a very expensive hybrid car.

And the argument for that is, well, it saves gas. Except we also offer a tax credit for buying a recreational vehicle, a notorious gas guzzler. So there’s no rhyme or reason to these; it’s whatever any lobbyist was able to nestle past Congress.

SOLMAN: What about provisions that most Americans are in favor of? The mortgage deduction, for example?

REID: That’s one of the most popular deductions. It costs the Treasury about $103 billion a year. Now that’s money we could use to treat wounded veterans or reduce the deficit or fill the border. Instead, we give it a subsidy to homeowners, and it goes mainly to the richest homeowners in America, because only one third of Americans itemize their deductions.

READ MORE: Why abolishing the corporate income tax is good for American workers

And, you know, it’s designed to enhance homeownership. Guess what? It doesn’t work. Many countries have gotten rid of the mortgage interest deduction. Almost all of them have higher homeownership rates than we do. If you ask any economist, they’ll tell you all the mortgage interest deduction does is raise the price of the house.

So a couple is out looking at the house, they say, “Oh, we love this house, but we couldn’t make the monthly payment.” And the realtor says, “Yeah, but you’re going to get a tax break.” So people pay more than they would otherwise.

SOLMAN: It’s always struck me as amazing, as long as I’ve been doing my own taxes, which is decades, that you get to depreciate the value of your home — you actually get to take that off your taxes, how much it lost in value — while it’s gaining value.

REID: Absolutely right. So you take a loss even though you’re making a gain.

SOLMAN: But I think Americans would rebel if you tried to get rid of the home mortgage deduction.

REID: I disagree, and here’s why. If you get rid of all these giveaways and loopholes and deductions and credits, then you can sharply lower the rates. So there’s a tradeoff. Yeah, I lose the deduction that I really like, but my tax rate is going to go down, and I don’t have to fill out that form anymore. It’s much simpler, rates are lower, and that tradeoff has worked in many countries. Many countries have just cleaned house of all those exemptions in order to provide lower rates, and people buy it.

SOLMAN: Another deduction is for health insurance. That’s a big one too, right?

REID: Yes, if your employer pays your health insurance, that’s not counted as income to you. And any economist would say that’s your income, because they’d pay a higher wage if they didn’t take it. That’s a huge loss to the Treasury.

You also get a deduction in America for taking a night school course, growing sugarcane, moving to a new city for a job, replanting a forest, insulating the attic, destroying old farm equipment, employing Native Americans, commuting to work by bicycle — but only if the bike is regularly used for a substantial portion of travel — or buying a plug-in hybrid sports car, or buying a recreational vehicle. I mean there are hundreds of them, and most of them are nuts.

SOLMAN: So how did other countries get rid of these provisions, or did they never have them?

READ MORE: Compare your pay after averaged taxes to other developed nations

REID: Most countries had the whole range of exemptions that we do. Starting in the ’80s or so, after the United States sharply cut its rates, other countries decided they better do it too, and here’s how you do it: you just wipe out the exemptions, the deductions, the credits, the depreciation allowances. And people complain, “Oh my God, it’s terrible,” but you give them much lower rates and you give them an easier form to file, and people accept that tradeoff.

SOLMAN: Do you like the idea of a graduated consumption tax? So savings are not taxed, but consumption is. They know how much you earn, they know how much you saved, the rest has got to have been consumption.

REID: I really like the idea of consumption tax, and most countries have a pretty serious consumption tax. It’s called a value-added tax or a goods and services tax … It’s a sales tax. It doesn’t tax labor, it doesn’t tax savings or investment — it taxes consumption. And it turns out a VAT — a value-added tax — is a very easy tax to collect and a very hard tax to evade. It’s a really good idea. It was invented about 60 years ago in France, of course.

SOLMAN: “Of course” because?

REID: Because they’re so good at taxing. They had a business tax that was easy to evade, and the head of the French IRS invented this value-added tax, which is very hard to evade. One hundred seventy-six countries have it now. It’s really a good tax. Professor Eric Zolt of UCLA, said to me, “The VAT is such a good idea, mark my words, within five years, the U.S. will have a VAT.” Then he said, “Of course, I’ve been saying that for 20 years.”

SOLMAN: So you’re saying this is all obvious. Every country in the world besides us has reformed its tax system, or most all of them. So why can’t we get rid of these provisions in the United States?

REID: Because in the United States, unlike any other advanced democracy, money really talks. Our Supreme Court has said that spending money on politicians is a form of free speech. No other court has said that.

SOLMAN: No other court anywhere in the world?

REID: They all have limits.

Watch Reid’s full interview on the April 13 broadcast of PBS NewsHour.

The post What other countries can teach America about taxes appeared first on PBS NewsHour.

DC’s new paid family leave is one of the most generous in the nation. But economist Harry Holzer worries the policy could have unintended consequences and hurt the women it’s trying to help. Photo by Eric Thayer/Reuters

Editor’s Note: Last week, the District of Columbia passed a new paid family leave policy, allowing new parents to take eight weeks leave, workers caring for sick family members six weeks and workers who are sick themselves up to two weeks.

The policy is a generous one for the United States, a global outlier as the only industrial nation in the world to not offer paid family leave. While other countries have successfully implemented such policies, they remain largely uncharted territory in the U.S.

Will D.C.’s new paid family leave policy help or hobble business? Will it help workers or unintentionally hurt them?

Economics correspondent Paul Solman posed that question to two different economists: Heather Boushey of the Washington Center for Equitable Growth who is in favor of the new policy and Georgetown University economist Harry Holzer who is concerned the policy will do more harm than good. You can read Paul’s conversation with Boushey here and his conversation with Holzer below. The following conversation has been edited for clarity and length.

— Kristen Doerer, Making Sen$e Editor

PAUL SOLMAN: So you opposed the original version of the bill here in D.C., right?

HARRY HOLZER: I did.

PAUL SOLMAN: Why?

HARRY HOLZER: It was extremely generous. It provided up to 16 weeks of parental leave and up to 16 weeks of family leave. And I thought that would have been extremely costly a) to the taxpayer and b) to employers.

There were at least two big risks. Number one, I thought the plan would be underfunded, meaning that the tax revenues they raised wouldn’t be sufficient to cover all the leave they were promising to pay out. And secondly, I thought this would be very costly to employers, even if they’re not paying directly out of pocket for all the leave. It would cause a lot of disruption. They wouldn’t know when the disruption was coming. And I was fearful that they would cut back on employment, especially of young, less educated women because of that.

PAUL SOLMAN: Disruption? What kind of disruption?

HARRY HOLZER: Disruption to the workplace. You know, if I’m an employer, I was counting on having this employee here, working full time. All of a sudden, she or he disappears for 16 weeks, and especially if I have to keep that job open, I can’t replace them with a permanent worker. It’s hard for businesses to plan when you have a lot of that kind of disruption going on.

PAUL SOLMAN: But the bill that passed is not 16 weeks.

HARRY HOLZER: No. The bill that actually passed was scaled back even from what the council was proposing just a few days ago. And now they’re going to provide eight weeks of parental leave, six weeks of family, two weeks of personal sick leave. So that does make it much more affordable. I still do have some concerns, even about the bill that was passed. They’re providing 90 percent wage replacement up to close to $1,000 a week. You’re giving the worker almost no incentive to limit the amount of time they ask for. Other states that have done this provide 60 percent, maybe 70 percent. So I think the incentives are not there for workers to try and limit this and that will then generate more leave perhaps than necessary.

PAUL SOLMAN: How do we determine how much leave is necessary?

HARRY HOLZER: Well, there’s not an absolute number. I do believe that there are important benefits. I’m a supporter of paid family leave, certainly to the moms. It enables them to stay attached to their employers and to the labor force, to the kids and, in some cases, even to employers, because it cuts down on unnecessary turnover and things of that nature.

But in economics, we’re always looking for that right balance between benefits and costs. We want employers to stay in D.C. We want them to keep thinking that it’s profitable to hire workers. When we make it so costly for them to hire workers, especially from a particular part of the population, they could cut back on their hiring. That doesn’t do anybody any good. So we’re looking for that right balance between the benefits and the costs.

PAUL SOLMAN: So you’re worried that employers would leave D.C. or replace workers with what?

HARRY HOLZER: They have a lot of different options if they want to. The first option is not to reduce overall employment, but to cut back on hiring the particular employees most affected by this. So number one, they could simply cut back on less-educated young women in the childbearing age and just replace them with other employees. That’s one possibility.

PAUL SOLMAN: But the other employees would be more expensive.

HARRY HOLZER: But they would presumably try to hire employees who would take less leave. So for instance, young men of the same age are less likely to take leave, because they’re less likely to have custody of the kids, and in general, the men take leave less frequently. They would try to hire anyone that they think might take less leave — somewhat older people, somewhat more educated workers, maybe men instead of women.

PAUL SOLMAN: So you’re particularly worried about young, relatively low-wage women.

HARRY HOLZER: That’s right. And the employers often have stereotypes about who is likely to stick around anyway and who’s likely to have a lot of kids. I fear that many employers in the low-wage labor market will see young, less educated minority women and assume that, number one, they’re not going to stick around for than six months or a year, and number two, now they’re going to take a lot of family leave and be disruptive even more. So my concern is that they would really try to discriminate against them in their hiring.

Another concern is that employers in Washington, D.C., simply might move across the river to Arlington, Virginia, because the state of Virginia is not imposing a paid family leave policy on employers in the state. And this is especially true after the city of Washington has imposed many costs on employers, like a $15 minimum wage, and all kinds of other restrictions in their hiring policy, each of which makes employment costlier in the city, and there might be a cumulative effect of all these policies together.

PAUL SOLMAN: But doesn’t paid family leave make Washington, D.C., a more attractive place for people to come and work?

HARRY HOLZER: It might make it a more attractive place for people that don’t have that policy already, but if employers aren’t willing to hire them, then that doesn’t matter, and the jobs won’t be there. My fear is that we will be driving employers either out of D.C. or at least out of the hiring activities for this low-wage earning group. I’m worried about the low end of the job market where employers don’t have that much trouble finding the people they need, and if we make it so much costlier for them to do so, they will simply do less of it, one way or the other.

And of course another possibility is they can stay here and simply hire fewer low-wage, less educated workers. In fast food restaurants or coffee bars, they can use a lot more robots over the next five to 10 years.

PAUL SOLMAN: So you’re afraid this will accelerate the move towards automation.

HARRY HOLZER: I think it could if it’s costly. The automation is coming anyway. This will create incentives for it to happen faster than it otherwise would and make the robots look that much more attractive in comparison to workers.

The post Will D.C.’s new paid family leave policy unintentionally encourage discrimination? appeared first on PBS NewsHour.

Economics correspondent Paul Solman sat down with Heather Boushey, chief economist at the Washington Center for Equitable Growth, to discuss DC’s new family policy and why she thinks it’ll be a boon for not only workers, but for business and the District as a whole. Photo by Aaron P. Bernstein/Reuters

Editor’s Note: Want productive workers? Give them paid family leave.

Want lower turnover? Give your workers paid family leave.

Want to keep your community’s economy thriving? You got it — paid family leave.

According to one economist, paid family leave is the answer to all three.

On Tuesday, the District of Columbia passed a new paid family leave policy — one of the most generous in the United States. As we reported last year, the United States and Papua New Guinea are the only two nations in the world to offer no paid maternity leave. And we’re the only industrial nation to not offer paid family leave.

READ MORE: D.C. Council passes one of the nation’s most generous paid family leave bills

Economics correspondent Paul Solman sat down with Heather Boushey, chief economist at the Washington Center for Equitable Growth, to discuss the new policy and why she thinks it will be a boon for not only workers, but for business and the District as a whole. Read that conversation below and for more, tune in to tonight’s Making Sen$e segment, which airs every Thursday on the PBS NewsHour. The following text has been edited for clarity and length.

— Kristen Doerer, Making Sen$e Editor

PAUL SOLMAN: So what’s happening now with paid family leave in DC?

HEATHER BOUSHEY: Well, here in the District of Columbia, the city council just voted by a wide margin to implement a paid leave program that will provide eight weeks of paid leave for new parents, six weeks to care for a sick loved one and two weeks if you have your own illness to be paid at 90 percent of your salary. We capped it at a fairly reasonable level. It’s very progressive. It means that lower-income workers are going to benefit a lot more than those at the top, and we’re going to make sure that everybody who works here in the District of Columbia has access to the kind of leave that allows them to care for their family and to keep their job.

PAUL SOLMAN: Who pays for it?

HEATHER BOUSHEY: So this is going to be paid for by a small tax on employers, a payroll tax just like the kind of payroll taxes that we all pay on our paycheck each week. It’s just like Social Security taxes. It’s a flat rate on paychecks that employers will pay.

READ MORE: Almost every country in the world offers more generous maternity leave than the U.S.

PAUL SOLMAN: So isn’t this something that employers were resisting? I mean, it’s another tax on employers, in addition to the taxes they already had to pay for unemployment insurance, say.

HEATHER BOUSHEY: So what you saw in the District was some resistance from the employer community, but his passed by a very wide margin in DC city council, so there’s a lot of people actually think this is a good idea for the economy. What we know from other places around the country that have done this kind of policy – California, New Jersey, Rhode Island and New York – is that this has been good for business, and it’s taken a burden off of businesses. So even though they have to pay this tax, they don’t actually then have to pay if an employee needs to take leave to care for her child or to care for a sick family member. They can rely on this broader system.

So while there is this fairly small tax, there’s a big benefit to employers. We know that there’s a boost in employee retention, it improves labor supply. So this on net can be quite good for business.

PAUL SOLMAN: So let me understand. If everybody is paying into the system, it’s like insurance. In other words, if a person takes leave at your company, then it’s not just your company that’s subsidizing it.

HEATHER BOUSHEY: Exactly. It’s insurance that says that anybody who works here in the District of Columbia will be able to tap into this program. Employers will, of course, have to deal with the absence of their employee, but employers already have to deal with this.

So regardless of whether or not this program exists, people get sick, people have babies, people need to take time to care for an aging loved one. Employers already have a management problem, and they all have a cost problem, because their employee needs to be out for a few weeks to take care of their new child. They already have to deal with that, and of course, employers do that each and every day. What this insurance program does is sets up a system that actually helps their employee deal with the income fluctuation.

READ MORE: Column: Working parents have two jobs — and both are important to the economy

We know that when families have new children, it causes enormous income volatility for families. They see their income drop and that adds to their economic anxiety. We know that employees that have this benefit are more likely to come back to their employer, saving the employer costs on having to replace that person over the long term.

So it takes that burden off the employer and allows them to focus on just getting the job done. They are going to have to figure out what to do while that employee’s out of the office, but they already had that problem. It’s not a new problem for them.

PAUL SOLMAN: From the point of view of an employer, it’s now costing more out of pocket than it would have cost, right? You’ve got a tax to pay that you didn’t have to pay before.

HEATHER BOUSHEY: So from the perspective of the employer, they’re going to have this new small tax to pay, but there will be this new benefit for employees that will also ultimately benefit the employer as well as the local economy.

PAUL SOLMAN: How?

HEATHER BOUSHEY: Some good employers provide people benefits. Many do not. The ones that do not tend to be the low end of the pay scale. This program will give those employers a way to support their employees. The employees will get this benefit, making it more likely that their employee will come back to them — that’s a benefit for the employer over the long term and a benefit for the employee and all the while supporting families in their time of need.

PAUL SOLMAN: I see why this is good for employees, but what’s in it for me as the employer?

HEATHER BOUSHEY: Well, there’s a few things. One, as an employer you already have a management problem when your employee has a new child or needs to care for their ailing family member. You’ve got to replace the person, at least temporarily; it’s a tremendous pain to hire somebody new.

Many good employers have an additional cost right now, because they pay their employee sick time, or they already provide them with some sort of benefit, and many employers can’t afford to do that. For those employers that can’t afford to do this, this is a small tax that will then give that benefit — paid leave — to their employees, and that will make it more likely that their employee comes back to work for them. It’s going to improve job retention, and I need to stress this – that this is going to be good for the overall DC economy. So it’s not just about the challenges facing any one employer – it’s about how this all adds up to what’s good for the economy. If we see less turnover of employees because of this benefit, if we see income stability for families because of this benefit, that’s going to be a net good for our local economy.

PAUL SOLMAN: How? How?

HEATHER BOUSHEY: It’s going to maintain family incomes. You’ve got a new child coming in to the family – that’s when a lot of families see a big income shock. This is going to help smooth that out. They’re going to be able to go out and keep buying diapers and formula and all the things that they need.

PAUL SOLMAN: As opposed to moving out of town.

READ MORE: Inside the candidates’ plans for paid leave and child care

HEATHER BOUSHEY: Yeah. And it’s going to increase the probability that people see the District of Columbia as a great place to work. It’s going to increase the ability of employers to lure good talent here to the District. And that’s what we’ve seen in other places that have done that. What DC is doing right now – they’re not going out to the wild blue yonder doing something we don’t know anything about. There are other states that have implemented these kinds of programs, and they found that they’ve been good for families, good for businesses and good for those economies.

PAUL SOLMAN: There’s a lot of concern about communities retaining their economic vitality at this point with some people just leaving. So you’re saying for any given community, employers now share the cost of family leave, and of course, the employees benefit and therefore stay or even come into the community, whereas they wouldn’t have without this policy.

HEATHER BOUSHEY: Yeah. You could add something really important, which is that we live in an economy where the vast majority of families have all caregivers in the workforce. You have mom and dad, you have people who are caring for elders. Most people have jobs, and this kind of policy makes it possible for people to actually live their daily lives, provide the care for their kids and their sick loved one when they need to and focus on their day jobs and do that job really well.

So what we know is that it boosts our labor supply, especially among women and people who have care responsibilities, it increases job retention for people, because people are more likely to keep their job when they have the tools to actually make it possible to balance all of these competing challenges in their daily life.

And all of that means that the economy is able to tap into that talent. It means that families have higher incomes all else equal so that they can spend that money in their community.

So this is the kind of policy that actually makes work possible for families, and that is a net good for our local economies.

PAUL SOLMAN: So this is a race to the top, as opposed to a race to the bottom.

HEATHER BOUSHEY: Certainly. And thinking about racing to the top or the bottom, you’ve already asked about the cost, right? Who’s going to pay for this? The reality is that right now, people in the District of Columbia are already paying for this. They’re paying for it through lost incomes, they’re paying for it through maybe losing their job and not being able to maintain it, because they don’t have this added benefit. That’s hurting both families, and it’s hurting employers. So this is a sane and sensible way to say: It’s not unexpected that people are going to have children or sick family members. It happens to all of us at one point or another. We need to plan for it. We need to have good policies that actually support our labor force and support our businesses, so that we can grow our economy.

PAUL SOLMAN: In the current environment, I can imagine a lot of people listening saying: You know, this is just the same old liberal policies of the past that really haven’t changed the direction of the American economy. It’s been going on with some people doing fabulously well at the top while more and more people struggle at the bottom.

HEATHER BOUSHEY: Yes. So I have a few reactions to that. First off, the United States now has lower employment rates for both men and women compared to most of our economic competitors in the developed world. Economists have been looking at why, and one of the reasons is because we don’t have these basket of policies. We don’t have policies that actually allow families to go to work and provide care. That is a net loss to our economy.

PAUL SOLMAN: So every month when the Bureau of Labor Statistics does their survey for the jobs report and asks 60,000 families, “Have you looked for a job?” about 5 million people or more say, “No, I haven’t looked in the last year.” But when asked, “Do you want a job?” they say yes. Are those are the kind of people you’re talking about?

READ MORE: What happens when both Mom and Dad can take paid family leave?

HEATHER BOUSHEY: Exactly. And I’m also talking about people who may think to themselves they can’t even answer yes, because they’re so frustrated with this labor market that doesn’t make it possible for them to fulfill their responsibilities at home and work. And this is both men and women.

Of course, you see it more among people with young children and people that have elderly parents. We have an aging society. People are caring for an elder, and people in their 50s and 60s want to keep their job, but need to have the flexibility to care for their ailing loved one. That is lowering American labor force participation rate in measurable ways, which is harming our national economy.

PAUL SOLMAN: And we are at something like an all time low with regard to labor force participation rate, right?

HEATHER BOUSHEY: Yes, for both men and women. So for men it’s been this long term slow decline and then a drop off in the Great Recession. For women it had been going up, but it plateaued in the late 1990s. Research has shown that a big part of that flattening of labor force participation is because we don’t have policies like paid family medical leave, child care and access to supports for help aids to care for ailing loved ones. These are real economic issues.

PAUL SOLMAN: It could become too generous though, couldn’t it?

HEATHER BOUSHEY: What do you mean by generosity? All of us were born at some point, and at some point, unfortunately, most people get sick or need to care for a loved one who is sick. I mean, that’s just acknowledging the reality of how we have to have labor market policies that allow people to have families, which is why we work in the first place. We have to have policies that allow us to be able to focus on our jobs and be highly productive employees. You need to be able to have policies that allow us to adjudicate between those two.

PAUL SOLMAN: For the last 10 or 20 years there’s been a surprisingly low productivity rate for American workers. Do you think that paid family leave has anything to do with it?

HEATHER BOUSHEY: What is productivity? Productivity is how well you use your work force and combine it with capital and all the things inside of a workplace to produce more efficiently. Well, if you’re inefficiently using the talent at your disposal in the workplace, then that’s going to lower productivity. What we see time and time again is that employers and communities – states, cities, governments – that don’t take seriously the need to make sure that their workforce is able to be highly productive at work are going see lower productivity growth. The basket of policies that give workers the time to get back to work and to focus on their jobs with the right sort of boundaries and support so that they can also care for their families – those are policies that improve productivity within workplaces and of course aggregate out to affecting U.S. productivity overall.

The post The economic case for DC’s family leave policy appeared first on PBS NewsHour.

U.S. President-elect Donald Trump speaks at his election night rally in Manhattan, New York, on Nov. 9, 2016. Photo by Carlo Allegri/Reuters

Editor’s Note: How did the pollsters get it so wrong? It’s a question that’s been on many minds since Nov. 9, when Donald Trump was elected the 45th president of the United States. Leading up to Election Day, the grand majority of polls, pollsters and prediction markets had predicted a Clinton presidency.

Economics correspondent Paul Solman posed this question to University of Michigan economist Justin Wolfers, who also writes for the New York Times Upshot, which had predicted that Clinton had an 85 percent chance of winning. For more, tune in to tonight’s Making Sen$e report, which airs every Thursday on the PBS NewsHour. The following conversation has been edited and condensed for clarity and length.

— Kristen Doerer, Making Sen$e Editor

PAUL SOLMAN: So the outcome of the election has been pretty humbling for those of us who follow the prediction markets, no?

JUSTIN WOLFERS: I’d just say it was a little humbling. I don’t want to overstate that case though. Remember the Chicago Cubs were two games behind in the World Series, and betting markets said that there was only a 30 percent to win the World Series. As history now records it, they went on and won the World Series.

Well, betting markets said the same thing about Donald Trump. They said that there’s some chance he could win; he wasn’t the likely candidate by any means. But just as sports history has seen upsets happen, so has political history, and Donald Trump will go down as one of the unlikely candidates who won, perhaps the least likely. But, you know, the truth is when the markets tell you something is a one-in-seven chance to happen, it’s going to happen one in seven times.

SOLMAN: And that’s I think what was so hard for people like myself and you who followed the betting markets to really fully internalize, don’t you think?

WOLFERS: Yeah, so when the market says something has, say, an 83 percent chance of happening, it’s like a lot of people use an internal shorthand — “Well, that’s near enough that I think it’s pretty close to a sure thing.” So markets weren’t telling you it’s not a sure thing; there’s some risk this won’t happen.

You know, I was surprised the whole time actually that markets weren’t more confident that Clinton would win. They were worried that the polls might not get this right. That something else was going on out there. They pointed to that very real risk, and that very real risk turned out to be something that happened, so we were surprised, but we should have been no more surprised than we were when the Cubs won the World Series.

SOLMAN: Sam Wang of Princeton said there was a 99 percent chance that Clinton would win, and that was days before and right up to the night of the election.

WOLFERS: That’s Sam’s forecast, it’s Sam’s forecasting model; the betting markets told me it was maybe a one-in-six or one-in-seven chance Trump would win. We can’t say after the fact who was right. So the analogy my colleagues at the [New York Times] Upshot would use is this is like a 37-yard field goal. Well, what do we know after the fact? We know the field goal missed. What we don’t know was it a 37-yard field goal attempt, or was it, as Sam Wang would have it, a field goal attempt from right in front of the sticks? All we know at this point is the field goal missed.

SOLMAN: When I first began to think that Donald Trump had a real chance was when the New York Times Upshot made that field goal analogy, and my favorite kicker from my team, the New England Patriots, missed field goals from a shorter distance than the odds were of Donald Trump winning. And at that point, I thought, “Hmm, I’d better realize that this is a possibility.”

WOLFERS: Yeah, so I think one of the things that we learn here — and this is a lesson for both the media and for social scientists — is how difficult it is to communicate clearly probabilities. One of the nice things we’ve done in recent election cycles is we talk a lot more in terms of probabilities than we used to, but you need people to understand them. So what my colleagues at the Upshot were doing was try to find a way of making it concrete and understandable. And maybe they succeeded with you, Paul. A missed field goal reminded you that sometimes one in seven chances happen. But it also clearly failed with a large number of people who said that they didn’t see this coming, who thought there was no chance, [and who after the fact thought] we should get rid of polls, we should get rid of polling, we should ban the laws of math altogether.

That says that when we told people it’s an 80 or 90 percent chance, they always thought it was a 100 percent chance, and we’re still going to try and convey the degree of uncertainty in a much richer way.

WOLFERS: The big difference here is that he’s going to get to continue to kick field goals, and he’ll do it over many seasons and kick dozens and dozens of them, and Hillary Clinton, she only had one chance. That one missed field goal is the end of her career. Though he might miss one today, he’ll get three tomorrow, and by the end of the season, you can see that he’s going to get 80 percent of his kicks. With Hillary Clinton, she only had one chance. With politics more generally, election forecasters only get one chance every four years. So we’d like to know that if we say something is a 90 percent chance of happening it’s going to happen nine out of 10 times, but just figuring that out means we’re going to have to wait 10 election cycles, which is another 40 years. By the time we hit there, we got a whole new public to educate again.

SOLMAN: What’s a better way of trying to communicate to people what a 20 or 30 percent chance of winning really means? When people would ask me, I tried by saying, “Hey look, I’ve got a little mole here on my finger, if you tell me it’s only a 20 or 30 percent chance that it’s a melanoma, I don’t sleep at night.”

WOLFERS: So one of the things is to make sure you talk through all the scenarios. So you describe not only the possibility this could happen, but you tell a story about how it could happen. And if the story sounds plausible, then it enters the realm of imaginability. When people can imagine something, it becomes a little more concrete. I think it’s also important for us to talk more explicitly about doubts. The biggest story of the campaign really was that Clinton was dumping Trump. It was just as important that we talk about our doubts and our hesitations and the things we didn’t know as well. And my colleagues at the Upshot, bless them, came up with this idea of describing the election in terms of you know a 34-yard missed field goal attempt, there was another certain point Nate Silver described it as having the same odds of the Cubs winning the World Series when they were down 3-1. When the Cubs went on to win the World Series, that’s something that got people thinking. They understood unlikely things sometimes happen.

So it appears that the numbers, the simple math is not enough. We’ve got to somehow use the power of storytelling, of narrative, of analogy. I teach my students, and some of them mathematically gifted, some of them respond to storytelling, some to analogy, and we need to make sure we describe uncertainty using all those different languages.

The post How did the pollsters get Trump’s win so wrong? They didn’t, says economist Justin Wolfers appeared first on PBS NewsHour.

Photo by Andrew Nelles/Reuters

Editor’s Note: What is President-elect Donald Trump’s plan for the economy? Economics correspondent Paul Solman sat down with Columbia University’s Adam Tooze to discuss. An economic historian, Tooze gives much needed historical perspective to Trump’s economic plan as put forward by his economic adviser Peter Navarro on Real Clear Policy.

PAUL SOLMAN: You’ve read Donald Trump’s so-called Gettysburg address, his economic program. [In late October, Trump spoke to supporters in Gettysburg, Pennsylvania, where Lincoln gave his famous Gettysburg Address over 150 years ago.] Historically, what does it remind you of?

ADAM TOOZE: I think as a historian, what strikes one the most about this program is simply its nationalism. Thinking about the record of American economic programs, it strikes me as perhaps the most nationalist in tone and in spirit that we’ve seen in the U.S. since the so-called isolationism of the Republicans in the 1920s.

READ MORE: What is the Trump trade doctrine? His economic adviser explains

PAUL SOLMAN: The Roaring Twenties was a period of enormous economic growth in the United States.

ADAM TOOZE: Absolutely, it was also a period of a rebound from an enormous war, so the growth is not altogether surprising, but it was growth that was also unstable and that came crashing down in 1929 in the Great Depression. And it was a period in which America’s economic policy was, from the point of view of the wider world, unhelpful, some would even say irresponsible, in failing to figure out the implications of America’s policy on trade, its policy on migration and its policy on foreign investment as well as the implications of those policies for Europe and Asia in the 1920s. And so in that respect, too, one is worried, perhaps, about the historical parallels.

PAUL SOLMAN: And the historical parallels specifically with regards to, say, immigration and trade?

ADAM TOOZE: Two of the key elements in the program that Trump outlined at Gettysburg are an aggressive assertion of American national interests with regards to trade policy.  The renegotiation of NAFTA and the renegotiation of a recent deal with South Korea, for instance, are mentioned as hot button topics that the new administration will address. And the other nationalist plank of the program is obviously the policy toward immigration and the promise to dramatically change the regime of migration to the U.S.

PAUL SOLMAN: But the program also has a huge investment in infrastructure?

READ MORE: Column: How cities and states are leading the fight for more beneficial trade

ADAM TOOZE: So the investment program is there for infrastructure. Clearly, the United States economy is in desperate need of investment in its infrastructure to repair deterioration, to provide America with a 21st century backbone for economic growth. What’s striking about the Trump program in its current form is that it’s unspecific about how it will be funded. It has about it the feel of financial engineering almost. There’s an element of hand-waving about how government money will be multiplied by means of public-private partnership, which is a common feature in thinking about government spending in an age of high debt, when any incoming administration is looking to provide stimulus without ramping up enormous deficits and adding to America’s existing debt burden.

PAUL SOLMAN: But President-elect Trump seems to be committed to a major infrastructure program. If he doesn’t get the private investment, I would think, or at least people think, he will use government money to do it and provide the jobs and re-build America.

ADAM TOOZE: Yes, I mean the need for investment is evident, and it was also a major part of his stump speeches while he was touring America. It’s also part of the piece with his commitment to the redevelopment of American manufacturing and industrial jobs, providing jobs for the constituency which was so important in electing him last night.

There’s no question at all that over the last 20 years blue-collar America, middle America, has been in the firing line of the pressures of globalization, which is also being felt everywhere else in the world — in Europe, even in the rust-belt in China. In the 1980s and 1990s, major industrial concentrations that were built up in the heyday of heavy industry in the middle of the 20th century — 1930s, 1940s, 1950s — came under massive competitive pressure from new suppliers in the Asian tigers, in Japan and South Korea, and all of them saw huge job losses. And these have continued if one thinks, for instance, of the troubles of the American auto sector all the way through to 2008, 2009. There is a constituency there which is clearly facing existential questions about its employment prospects in the 21st century.

PAUL SOLMAN: But he’s addressing that constituency.

ADAM TOOZE: That is certainly the promise of his campaign, and the promise of his economic program. This economic program is really the pick-up truck of economic programs, it’s the Ford F-150 of economic programs, it’s macho, it’s heavy industrial, it’s about blue-collar jobs, it’s about the jobs of the 20th century, it’s about manufacturing, it’s about oil and fossil fuels. It’s a deliberate, forceful reassertion of an image of American industrialism that we have inherited from the 20th century.

READ MORE: Yes, trade with China took away blue-collar jobs. And there’s no getting them back.

PAUL SOLMAN: As a historian do you find that anachronistic?

ADAM TOOZE: In some senses I think it’s almost deliberately anachronistic. There’s a retro feel to the Trump program, and one can understand the politics of that at this moment: It speaks to a constituency that’s underserved. I think if one wanted to make sense of this program, it’s a kind of holding action, it’s an effort to bide time for a constituency of workers who have really been suffering in the last 20 years and who need to be prepared and be given time to prepare for a transition to a very different type of employment that we may be moving into in the coming decades.

PAUL SOLMAN: So it’s buying time for the children of these people while they continue to have jobs that are essentially going to disappear anyway?

ADAM TOOZE: For the last 20 years, all the way back to the Clinton administration of the 1990s, the question of how we reskill the American workforce for future employment is one of the key issues of economic policy. What will be interesting to see is whether or not we see from the administration initiatives on higher education for this workforce. Because if those kinds of training opportunities are not provided, then I do think this program begins to look like a defensive, holding acting, a rearguard action, buying time for workers who might not otherwise find positions in the 21st century.

As you say, perhaps with their children, this is a launching pad. Without a stable, domestic platform, without a stable home, it’s difficult for kids to make their way into college education. We know that social mobility in the United States over the last generation has slowed down. A lot of that has to do with the fact that the bottom has fallen out of working-class families, which previously might have provided a springboard to higher education in the glory days of American public universities in the ’50s and ’60s. Those kinds of routes out of blue-collar family backgrounds –by way of college education into white collar work — were quite common. And they’ve become increasingly less so in part because of the crisis in manufacturing and in industrial work.

PAUL SOLMAN: But this was the rationale for saving the auto industry, wasn’t it? The Democratic Party’s rationale was, we’ll preserve jobs at least for a while to keep the people who have had them employed.

ADAM TOOZE: I think there’s a real common ground here, in fact. That was an exception within the Obama administration’s economic policy, a crisis that he inherited from the previous administration, and felt it was essential to carry through on. It went hand in hand with really deep restructuring with both GM and Chrysler, but in a sense I think one can see the Trump program as if it were that element of the bailout of 2009, writ very large, and now extended out towards fossil fuels.

The post A historian’s take on Trump’s economic plan for blue-collar, manufacturing jobs appeared first on PBS NewsHour.

Steaks and chops described as “Trump meat” are shown near the podium with Trump branded wines and water before U.S. Republican presidential candidate Donald Trump was scheduled to appear at a media event at his Trump National Golf Club in Jupiter, Florida, March 8, 2016. Photo by Joe Skipper/Reuters

Editor’s Note: We’ve spent plenty of time here on Making Sen$e talking about Trump’s trade policies, the outsourcing of his products, his taxes and his economic plan for the U.S. But what about Trump, the brand? On tonight’s Making Sen$e, Paul Solman explores the Trump brand and how it has fared since the start of his presidential bid.

Below, we have a conversation between Paul Solman and brand consultant Robert Passikoff, who has studied Trump for decades. So what makes the Trump brand? Glitz and glamour, says Passikoff. Read that conversation below, and tune in to tonight’s Making Sen$e report on the PBS NewsHour for more. The following text has been edited for clarity and length.

— Kristen Doerer, Making Sen$e

PAUL SOLMAN: So any celebrity who attaches his or her name to a property bestows a premium on the value of that property?

ROBERT PASSIKOFF: Yes. It changes the value. It’s the difference between a commodity and a brand. It’s exactly what a brand is supposed to do. Various celebrities, or people, have certain corresponding values that work very well with certain products. And so, if they attach their name or even just stand next to a product, it becomes more valuable.

PAUL SOLMAN: Why?

ROBERT PASSIKOFF: Well, emotionally, you’d have a very hard time emotionally bonding with a bag of sand that you needed to put on the street for ice. But if someone attached a name to it, like Morton’s, all of a sudden, it isn’t just the bag of sand. It’s added value. It essentially means that the product is better fulfilling your expectations.

PAUL SOLMAN: But it’s just a name!

ROBERT PASSIKOFF: Right. Most of the time, it’s just a name. I mean, today you see celebrities all the time looking for additional income streams, and all they have to do is show up for a photo shoot and make a couple recordings, and they walk away from it. It’s easier to attach a celebrity name to something than it is to actually build the brand from the ground up.

READ MORE: Do Trump products really thrive?

PAUL SOLMAN: But, why does it matter? I know the celebrity is being paid. I doubt the celebrity is even using the product. So why does it have any emotional impact on us? It’s always been a puzzle to me.

ROBERT PASSIKOFF: It changes the perception of what the product is about and who associated themselves with it. Virtually everything we buy comes from three factories in China. And yet, certain things have a greater value to us than others because of the name that’s attached to it. You’re never just looking for basic fulfillment. You have choices in the marketplace, and so you pick things that you feel represent your values and that make you feel different, better. And you buy something that you have psychologically created a benchmark for in your head, and you use brands just to sort that out.

Donald Trump franchised his name and brand to categories in which the values seem imbued within Trump, at least up until he ran for president. I mean, people aspire to luxury. They aspire to glamour. They aspire to money. It’s the good life!

I think it would be interesting to go back and see which of the categories, and there have been many, that he has licensed his brand to have done very well and which have not done very well. Because, for example, people point and say, “He’s not successful in everything,” and he hasn’t been. Water, for example.

PAUL SOLMAN: There was Donald Trump water?

ROBERT PASSIKOFF: Yes, but it did not do very well. I would suggest that the reason that it didn’t do very well is because water doesn’t require glamour. Water doesn’t require luxury.

PAUL SOLMAN: I’ll say!

ROBERT PASSIKOFF: Therefore, putting his name on it, no matter what financial deal he cut to do that, doesn’t really bring anything more in terms of differentiation or engagement with the product. And so it probably didn’t do very well for that reason. I mean, he did very well, because he got paid a certain amount of money for permission to use his name, and there was probably some deal where he got a percentage of the sales. He would want all the money he could get, but if it didn’t work out, he wasn’t the one that took the beatings. Whoever was producing Trump water and distributing it were the ones that didn’t do well.

READ MORE: What’s ‘Pre-Suasion?’ How marketers make us receptive to an ad

PAUL SOLMAN: And that’s how it’s been with everything he puts his name on, right?

ROBERT PASSIKOFF: Yeah. He was a human brand, he was an icon for the good life.

PAUL SOLMAN: And was he unique in that respect?

ROBERT PASSIKOFF: Yeah, pretty much. People have suggested now that it was wretched excess, but if you think back to the ’90s and how people were living, and even today, wouldn’t you like to have a billion dollars? Sure, I would! And I would like to be able to jet all over, and I would like to have a triplex on 5th Avenue, with perhaps less gilt all over everything. There aren’t many human brands out there that speak those values.

PAUL SOLMAN: So, I, as a consumer, want to be identified with that?

ROBERT PASSIKOFF: Yes.

PAUL SOLMAN: So if I wear a Trump tie, I’m signaling that I’m at least aspiring to be rich and famous?

ROBERT PASSIKOFF: Right. You have a power tie on, you are astute in terms of what you select for yourself. It says certain things about you, and more importantly, it says something to you.

PAUL SOLMAN: And when I have a little Ralph Lauren Polo player guy on my shirt—

READ MORE: Column: Trump’s outrage over outsourcing doesn’t apply to his own merchandise

ROBERT PASSIKOFF: Brands are hired to make you feel better about your choice. The truth is that the 100 percent cotton shirts are exactly the same, except one has a logo, and one doesn’t. And you’re willing to pay three, four, five times the price for that shirt. Now, we can argue, and people nitpick about quality and such. And there are differences, but nothing that you’re actually going to know. I mean, a 400-thread count sheet is a 400-thread count sheet.

There was a time, of course, when you attached Martha Stewart’s name to it and it became something more than just a 400-thread count sheet!

PAUL SOLMAN: Is there still a premium associated with Martha Stewart being on the sheets?

ROBERT PASSIKOFF: Not as much as there used to be. When she went to court and then went to jail, the brand paradigm changed, and the view about her was that there wasn’t any trust there.

She was one of this very select group of people who, everything that she was, imbued the brand with what it was. And the minute she came under attack, she changed and therefore the meaning of the brand changed. We were down, I think at Foley Square, when she was going to court, and there were a million people taking photographs and such, and she whipped around and said, “This is an entirely personal matter.” And the answer is, no! When you are a human brand, it’s never a personal matter. You’re the brand!

PAUL SOLMAN: How much of a premium did Martha Stewart’s name command before and after her public shaming and incarceration?

ROBERT PASSIKOFF: I’d say that it was 50 percent higher than the comparable product. And afterwards, it’s whatever things are going for in the marketplace.

When we have a product, and it has no one representing it, and you take someone and put them next to it, you can get usually between a 10 and 15 percent percent bump.

The post How Donald Trump equated his name with luxury and sold it to the masses appeared first on PBS NewsHour.

Washington state’s Initiative 732 proposes imposing a tax on carbon emissions. The initiative has gained support from unlikely places, including Republican economist Greg Mankiw. Photo by Bret Hartman/Reuters

Editor’s Note: In April, Making Sen$e reported on Initiative 732, which proposes imposing a tax on carbon emissions in Washington state. The carbon tax would be revenue-neutral. That is, the revenue from the tax on carbon emissions would go to reduce other taxes in the state — most notably, the sales tax and the business tax. The initiative has gained support from unlikely places, chief among them, Gregory Mankiw, a conservative economist and former head of George W. Bush’s Council of Economic Advisers. Below, Mankiw explains why he and other economists of different political persuasions support the carbon tax and why certain environmental groups don’t.

Ahead of the Nov. 8 vote, the future of the initiative is uncertain — the most recent poll showed 42 percent in favor and 37 percent against. For more on the topic, tune in to tonight’s Making Sen$e report, which airs every Thursday on the PBS NewsHour. The following text has been lightly edited for clarity and length.

— Kristen Doerer, Making Sen$e Editor

GREGORY MANKIW: The first principle of economics is that people respond to incentives. What carbon tax tries to do is try to harness that principle to get people to reduce their carbon footprint.

PAUL SOLMAN: And the incentive is…

GREGORY MANKIW: Any time you put carbon in the atmosphere, you’re going to pay a price for it. So if you drive your car a little bit more, you’re going to pay a little bit more for that. If you use a little more electricity generated by coal, you’re going to pay a price for that. So what we want to do is we want to give people price incentives to reduce the amount of carbon they emit into the atmosphere.

READ MORE: Washington state’s carbon-tax plan, cartoonified

PAUL SOLMAN: And carbon is what economists call a negative externality, right?

GREGORY MANKIW: That’s right. Scientists tell us that carbon released into the atmosphere has adverse effects on the climate. That is a classic example of a negative externality, meaning a side effect associated with a certain form of economic activity. What economists want to do is they want to internalize the externality. That means they want people to pay for the adverse side effects. When you have a side effect on somebody else, you pay for it, so you take that into account when you make your day-to-day decisions.

PAUL SOLMAN: So if I use energy that comes from some source that generates carbon — a bad thing — you want me to pay for the bad and you do that by imposing a tax.

GREGORY MANKIW: Exactly. When you go buy a good, you pay for the resources that go into producing that good. So if something’s made out of metal, you pay for the metal indirectly through the price of that product. When you emit carbon, you are basically using up a resource, a valuable social resource, which is the atmosphere, and what we want you to do is to pay for that resource you use up when you are buying that high carbon-intensive product.

PAUL SOLMAN: So a carbon tax seems to be a good thing. Why is there so much opposition to it?

GREGORY MANKIW: Well, there are some people who don’t believe that climate change is real. But scientists tell us that is not the case, so I take the scientists at their word. Some people are afraid that if we have a carbon tax, people are going to use it as an excuse for more taxes and bigger government. And that doesn’t have to be the case. A carbon tax can be revenue neutral, meaning that you impose a carbon tax on carbon-intensive goods and use that tax revenue to refund it by reducing other taxes or by giving people a carbon dividend.

PAUL SOLMAN: And that’s how the referendum in Washington state is written, so that it’s revenue neutral?

GREGORY MANKIW: That’s right. They’re going to impose a tax on carbon, and they’re going to get more money from that, and they’re going to reduce other taxes, largely the sales tax. So you will pay more when you buy a carbon-intensive good, but you will pay less when you buy lots of other goods that aren’t carbon intensive, because the sales tax will have gone down.

PAUL SOLMAN: There’s an argument as to whether that’s going to generate or decrease economic activity in general, right?

GREGORY MANKIW: Well, there is some debate about that, and what it’s going to really do is shift economic activity away from high carbon-intensive activities towards low carbon-intensive activities. As long as it’s revenue neutral or approximately so, it shouldn’t have an overall macroeconomic impact. It’s going to change the composition of what we’re doing away from stuff that’s harming the environment towards stuff that’s cleaner.

PAUL SOLMAN: You are a Republican, head of George W. Bush’s Council of Economic Advisers, and you’re in favor of this, while almost every environmental group is against it. How can that be?

GREGORY MANKIW: One reason I’m in favor of a carbon tax, even though I view myself as a conservative, is that I view this as a conservative approach to dealing with climate change. The alternative to giving the people the right incentives and letting them make free choices is to regulate their behavior and that’s what we’ve been doing to a large extent for a variety of pro-environmental regulations. If we give people the right incentive with the carbon tax, then a lot of those regulations will become unnecessary because people are automatically incentivized to do the right thing.

Now the reason that some of the environmental left is opposed to this is that they don’t like the fact that it is revenue neutral. Some people see this carbon tax as a way to fund projects that they would like to have funded, so they see it as one vehicle for larger government. My perspective, I view this as a way to clean up the environment without expanding government by shifting from one kind of tax to another kind of tax.

PAUL SOLMAN: So you’re not surprised that environmental groups are against this?

GREGORY MANKIW: I am somewhat surprised because I think if their main interest is cleaning up the environment, this is the right thing to do. I think economists from right, left and the center view carbon taxes as the most effective policy for reducing carbon emissions, so therefore, I think anyone worried about climate change should gravitate towards this.

The post Why this conservative economist supports a carbon tax in Washington appeared first on PBS NewsHour.